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Restoration of Mortgage Loaning By Mortgage Fund of Azerbaijan Baku city - 2009

Restoration of Mortgage Loaning By Mortgage Fund of Azerbaijan Baku city - 2009. Resources allocated from State budget. Million AZN. Dynamics of loan allocation. Average indicators on allocated mortgage loans. Number of Credits - 1981 Anticipatory payment – annual 1 %

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Restoration of Mortgage Loaning By Mortgage Fund of Azerbaijan Baku city - 2009

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  1. Restoration of Mortgage Loaning By Mortgage Fund of Azerbaijan Baku city - 2009

  2. Resources allocated from State budget Million AZN

  3. Dynamics of loan allocation

  4. Average indicators on allocated mortgage loans • Number of Credits- 1981 • Anticipatory payment– annual 1% • There are not default cases

  5. Conditions on allocation of mortgage loans

  6. Standard Documents regulating Mortgage loaning • Rules on allocation of mortgage loans through resources of Azerbaijan Mortgage Fund under Central Bank of Azerbaijan Republic • Rules on allocation of social mortgage loans in Azerbaijan Republic • Standard Requirement to allocation of mortgage loans by authorized loan organizations which refinancing by Azerbaijan Mortgage Fund under Central Bank of Azerbaijan Republic • Temporary Rules on refinancing of mortgage loans allocated by authorized loan organization through Azerbaijan Mortgage Fund under Central Bank of Azerbaijan Republic

  7. Restoration of mortgage loaning • Additions and changes to Standard Requirements • Amendment to Main Agreement • Increasing of Fund’s quotation rate • Reviewing the list on Market participators • Identification of limits on Authorized loan organizations • Restoration of initial refinancing mechanism • Collecting daily information from banks

  8. Additions and changes to Standard Requirements • Conditioning of under-writing • Mortgage object should be only mortgage object • Obligation of life insurance • Existence of special division in banks • Technical corrections

  9. Underwriting conditioning Some requirements regarding borrowers have been conditioned by keeping in force existing conditions, recommendations have been changed to requirements: 1. Considering of borrower’s family expenses and other obligations Purpose – to increase requirements to borrower’s payment ability 2. Requirement on consideration of borrower’s loan history in underwriting 3. Implementing of initial evaluation and underwriting only by ALOs (definition of mortgage agent is extracted) Total obligations / Official incomes ≤ 100% Payments on salary - 154 Salary - 906 Monthly family expenses - 4*84=336 100% Other obligations - min30 Obligations on mortgage loan - 386 906

  10. Technical corrections • Precising the meaning of near relative (Article 2.12) • Increasing the list of required documents (marriage certificate, documents related to family members) • Corrections to Loan and mortgage contracts (mortgage object, life insurance, corrections regarding delivery of amount to seller and etc.)

  11. Additions to Main Agreement • Getting the non-recurrent order for non-accept omission from banks • Indisputable omissioning of relevant amount from correspondent account of bank if bank doesn’t buy back rights on mortgage loan

  12. Quotation rate

  13. Structure of Interest rate ≤ 8% Quotation rate of AMF = 4% Margins of ALO ≤ 4% 4% Quotation 4% Margin

  14. Repeated reviewing the list of market participators • Confirmation the new list of authorized loan organizations Considered factors: • Active participation in loaning • Existence of special division and specialized stuff in bank • Quality of documentation • Service to loans • Observance of prudential requirements of loan organization • Selection of authorized loan organizations and evaluators, and approval of Rules on activity assessment and repeated accreditation

  15. Authorized loan organizations 12.“Pahsabank” OJSC 13. “Unibank” OJSC 14.“Technicabank” OJSC 15.“Turanbank” OJSC 16.“Khalg” Bank OJSC 17.“Zaminbank” OJSC 1. “National Bank of Azerbaijan” OJSC 2. “AtaBank” OJSC 3. “Azerrailwaybank” OJSC 4. “Azerigasbank” OJSC 5. “Standard Bank” CJSC 6.“Bank of Republic” OJSC 7.“Bank of Eurasia” OJSC 8. “Bank of Azerbaijan” OJSC 9.“Ganjabank” OJSC 10.“Capital Bank” OJSC 11.“Mughanbank” OJSC

  16. Rules on selection of authorized insurance companies and evaluators • Defining the requirements for companies • Regulating relations with fund on the basis of contract • Applying quarterly reporting system • Assessment of annual activity • Confirming with Fund forms of evaluation reviews and insurance contracts

  17. Main factors on selecting independent evaluating companies and evaluating of activity Selecting: • Existence of constant office and experts no less than 3 • Experience on evaluating of real estate (1 year work experience and cooperation with more than 3 loan organizations) • Existence of relevant certificate reflecting professionalism level Evaluation: • Correspondence of evaluating report form to agreed form • Assigning the price of mortgage object in accordance to real market prices • Other factors showing professional, transparent and objective activity of independent evaluator • Dynamic activity of company in market (more than 10 evaluation on loans allocated through AMF) • Violation the requirements of cooperation agreements and etc.

  18. Independent Evaluators 1. Azerexpertiza 2. Azintellekt servis 3. Bilender 4. IVC-International Evaluating Center 5. Koneko 6. Marketing Business Analysis 7. MAK Consultancy Baku Ltd 8. REC Invest 9. VES Consultancy

  19. Main factors of insurance company’s activity assessment • Existence of sum capital on the level defined in legislation. • Company’s indicators on collected insurance payments • Organization of work with customs • Implementing insurance payments in insurance cases. • Financial Results. • Other factors.

  20. Insurance Companies 1. Azerinsurance 2. Azinsurance 3. Alfainsurance 4. Atainsurance 5. Ateshgah 6. Baku Insurance 7. Bashak-Trust Company 8. International Insurance 9. MBask 10. Pasha insurance 11. Standard Insurance 12. Khalg Insurance

  21. Defining the limits on loan organizations • Initially defining the limit for each authorized loan organization * Main reasons: • Indefinite volume of required mortgage loans • Management of Fund’s liquidity Limits can be changed (increased-decreased) during loaning process. * Rules on allocation of mortgage loans – “3.3. AMF can define limits to volumes of mortgage loans which will be getting from each bank”.

  22. Limits of AMF Limit 1 000 000 FR 1 000 000 Authorized Loan Organization 1 000 000 Allocated Loans

  23. Restoration of Initial refinancing mechanism Interest rate on initial refinancing – 8% Period – 120 days • Required documents • Quaternary for getting loan; • Evaluation act of mortgage object; • Loan contract; • Document proofing payment of amount to seller • Repayment of initial financing amount • Getting the non-recurrent order for non-accept omission from banks • Indisputable omissioning of relevant amount by by Central Bank from correspondent account of bank if bank doesn’t buy back rights on mortgage loan

  24. Collecting daily information from bank It is necessary to collect following information on daily basis from authorized loan organizations for liquidity management of fund and for prevention arising of displeasures regarding mortgage loans between society: • Entered appeals • Agreements given by banks • Loans allocated by banks

  25. Factors to be noticed • During initial evaluation: • Registration (Amendment-2) of applications. • Analyze of borrower’s (joint borrower’s) average monthly income and expenses, especially expense on keeping each family members shouldn’t be less than the defined dwelling minimum on country. • Loan coefficient L/M (LTV) ≤85%, KO/G (PTİ) ≤70% • Delivery of amount to seller correctly and in time. • To receive correct and in time annuity payments from borrower and to provide their transfer to AMF. • Implementing monitoring of mortgage object with the condition of no less than one time in a year • In time signing and prolongation of insurance contracts, especially to change beneficiary person..

  26. Requirements regarding market participators • To give priority to purchasing of flats in new constructed buildings for the purpose of supporting construction sector; • Engagement of specially created structural division or relevantly trained specialists with mortgage loans in bank • To increase dynamic of banks and allocate mortgage loans in possible much volume; • More diligent investigation of borrower’s payment ability • To register borrower’s appeal in basis of shifting and investigate attentively • To prevent completely abusive cases of loans

  27. Gratitudes Mortgage Fund under Central Bank of Azerbaijan Republic Tel (99412) 5982008 Fax: (99412) 5981177 info@amf.az www.amf.az

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